The story my colleague Russell Lynch relates on the opposite page, of Irish supply teacher Tomas O’Comartuin watching in horror at the back of the class as his currency trading position was destroyed by the Swiss National Bank’s shock decision to abandon its currency’s peg to the euro, is gut wrenching.
The £280,000 loss he racked up is a debt he will probably never be able to repay and that spread-betting companies such as IG will have to write off.
But the latter is still going after those who it thinks can pay, even if the so-called “stop losses” they thought would protect them proved worthless. Understandable enough, you might think, given the £18m hole IG has in its numbers.
They say that what happened to the Swiss Franc was a once-in-a-lifetime event that couldn’t have been predicted. But follow financial markets for long enough and you’ll realise such events are more common than people would have you believe. Remember the credit crunch? Banking executives said the same thing of that. So that’s two unpredictable, once-in-a-lifetime events in just seven years or so. The lifetime of a guinea pig, maybe.
The surge in the Swiss franc might just cause a few more people to realise that if you can’t pay you shouldn’t play.
As much as they might dislike the word, what spread-betting firms offer is still a gambling product. The part of the gambling industry that doesn’t mind being referred to as such is currently in the throes of making changes. Facing considerable political heat, responsibility is now the watchword. Lose too much and a betting shop manager will play the role of sensible publican, telling you you’ve reached your limit. Telephone, and internet accounts are also monitored for signs of trouble.
IG and its peers operate in a different space, they’re regulated by different people (the Financial Conduct Authority rather than the Gambling Commission) and they’re viewed through a slightly different lens. However, the FCA is reviewing the industry’s practices and will probably call on it to do more later this year.
The industry needs to play its part too. I’m not about to argue here that people like Mr O’Comartuin should be banned from spread betting. Nor am I absolving him of taking responsibility for his actions.
But it can’t be in the interests of IG to allow people like him to get burned like this. If nothing else, allowing people to rack up losses they can’t handle is just bad business practice.Reuse content